How to encourage property owners to rent out more houses?

In recent years, there has been a significant increase in demand for rental housing in Portugal, but the supply remains low. Although the real estate market seems to offer good investment opportunities, the actual situation in the country does not show noticeable improvement. To enhance the attractiveness of rentals and expand the availability of rental apartments, the government led by António Costa has initiated a series of measures under the "More Housing" program. However, not all changes have received support from property owners.

Necessary measures to increase supply

What is needed to encourage owners to rent out their apartments? Experts interviewed by Idealista/news express the opinion that to create the necessary climate, it is essential to:

• More trust in the actions of the authorities;
• Stability in legislation;
• Significant tax cuts;
• Fair laws that protect both tenants and property owners.

These are important points that the new government formed by the Democratic Alliance should consider in its work during this legislative term.

Current interest in renting

In Portugal, there is a high interest in renting. The annual report from Idealista/data showed that due to rising housing prices that do not match the real income of the population, as well as high inflation and high interest rates, renting is becoming more relevant compared to buying a home. The level of interest in renting an apartment is almost 23 times higher than the interest in purchasing one. However, the lack of available rental options creates serious barriers to the development of this sector. Renting is seen as a risky business due to high tax burdens, the potential for property damage, and lengthy legal proceedings regarding evictions.

Measures of the Koshta government

To increase the supply of rental properties, the Koshty government, which is currently in full control until a new cabinet is formed, has proposed a series of measures in line with the "More Housing" initiative, which has been in effect for almost six months. However, not all changes have been positively received by property owners. Experts note that:

• Reduction of income tax on rental income;
• Improving the protection of property owners;
• The possibility of transferring properties used as temporary rental spaces back to the rental market.

At the same time, restrictions on rent increases for new contracts and the forced leasing of vacant properties raise concerns and exacerbate the situation in the market.

Demand for rental housing

Let's try to understand the situation with the demand for rental housing in the country. The demand for rentals always exceeds the number of available properties. "The most developed areas are those adjacent to the coast, where demand is particularly high; however, the issue of housing shortages affects all regions of the country," notes Francisco Reganha, manager of the Aluga Seguro division, in his comments to Idealista/news.

Short-term contracts

Although the Koshta government aimed to increase the number of long-term rental contracts by reducing the income tax on rental income, in practice, a different trend is observed – the number of short-term contracts (averaging 2-3 years) is on the rise. "Tenants prefer medium-term contracts because they can terminate them after one-third of the time or even earlier if there is a valid reason," says Luis Menezes Leitao, president of the Portuguese Confederation of Property Owners.

Foreign tenants

Many of these short-term contracts are in demand among workers who are professionally mobile, as well as among young couples who cannot obtain a mortgage to buy their own home, mainly due to low salaries and high taxes, which significantly complicates the process of paying existing rental rates. There is also a noticeable interest from foreigners (mainly from non-EU countries) who have chosen Portugal for living or working in recent years, including refugees from conflict zones. As the current situation shows, the number of foreign tenants actively seeking rental housing significantly exceeds the number of Portuguese tenants.

Prospects for rental demand

In the near future, it can be expected that the demand for rentals will continue to exceed supply, leading to further increases in rental rates.

Recommendations from specialists

Although the measures of the "More Housing" program may contribute to some stabilization of prices, the very missing rental properties that could offer more rental opportunities, this will not have an immediate effect. Thus, the rental issue persists until there is an increase in construction and real steps are taken to encourage owners of vacant properties.

Experts surveyed by Idealista/news have a number of recommendations on how to expand the rental market supply. Additionally, they emphasize the need for sustainable legislation, greater protection of property owners' rights, a reduction in tax burdens, additional support measures for owners willing to improve their properties, and increased oversight of the condition of rented premises.

Tips for Owners

Now let's figure out what exactly owners need to do to successfully rent out their apartment. The process begins with understanding what the owner should consider when listing their property for rent. "The rental process from the owner's perspective involves both protecting their capital and generating stable income," comments Patricia Boavida, a lawyer from Belzuz Abogados.

When an owner is ready to put their property on the rental market, they should consider a number of factors that can affect the success of this venture. First and foremost, it is necessary to:

• Check for valid energy certificates.
• Don't forget about property licensing for rental purposes.

Despite the new simplifications that allow real estate transactions to be conducted without a mandatory usage license, the rental rules remain the same, and any rental without the appropriate documents is considered illegal.

Legal aspects

Checking the property records and land registry will help avoid potential issues during the rental phase. As for the legal aspects, the rental agreement should be made in writing and include the following elements:

• Identification of the parties;
• Location and purpose of the rental;
• Rent amount;
• Date of signing.

Definition of rent

From the perspective of determining rental payments, the landlord has the right to freely set the price if the property is being placed on the rental market for the first time. If the housing has already been rented out in the last five years, the initial rent of the new contract can increase by no more than 2% compared to the last rent, according to the rules of the "More Housing" program. It is important to clearly define the conditions for revising the rent; if such a clause is absent, the rent may be revised based on inflation coefficients.

Conditions for contract termination

It is also recommended to include a clause about advance payments and deposits in the contract. According to the law, the owner can require an advance payment of up to two months' rent and a deposit equal to up to two months' rent. It is also very important to clarify the terms of termination of the rental agreement to avoid any potential misunderstandings.

Notification from the tax service

After completing these steps, the landlord must notify the Tax Service about the rental of the property by the end of the month following the start of the lease and pay the stamp duty. Ignoring these obligations may result in fines and other legal consequences. If the property is mortgaged, obtaining permission from the bank may be mandatory.

Conclusion

In conclusion, it is important to emphasize that having the right knowledge and a competent approach to renting can significantly increase the chances of success. Owners should seek assistance from qualified professionals to properly prepare their property for rent and minimize risks. Only in this way can a competitive rental market be created, ensuring a mutually beneficial exchange of interests between owners and tenants.